Abstract:

Can a payment for flows of ecosystem goods and services system, following appropriate management and restoration of natural capital produced in rural areas of a developing country, be developed in a way that benefits communities, the commercial sector and the environment? This fundamental question acts as rationale for conducting an in-depth assessment as to whether the development of markets for ecosystems is both appropriate and sufficient when dealing with the restoration of natural capital of two degraded study areas within the Maloti–Drakensberg mountain range in southern Africa, which is a fire-prone grasslands ecosystem. The mountain range is South Africa's most strategic source of fresh water. While occupying less than 5% of South Africa's surface area, it produces 25% of the country's runoff through rivers, major dams, and national and international inter-basin transfers. Addressing the question, the study develops an integrated hydrology–ecology–economic model based on the functional relationships between these three aspects in managing and restoring the natural capital of the two study areas. It was found that the benefits of introducing improved management practices exceeds cost in low to medium degraded quinaries, but not in heavily degraded quinaries. The economic return on the water (baseflow) produced by such a system of improved land use management, however, far exceeds that of conventional (construction-based) water development programmes and offers meaningful economic and market development opportunities.